Mailbag

Dec. 10, 2001 12:01 a.m. ET

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Interest Ratings

To the Editor:

Regarding "About as Low as They'll Go" (November 26), and the overriding assertion that nominal Treasury interest rates are headed higher: With observable implied break-even U.S. inflation rates around 1.2%-1.5% for the next 5-to-10 years and by employing slightly more modest long-term real economic growth assumptions (in the 2%-2.5% range), I wouldn't be so quick to dismiss the possibility of low nominal interest rates being with us for some time to come.

David Kulsar White Plains, New York

To the Editor:

What about demographics? The high interest rates of the 1970s occurred as the Baby Boomers were in their high consumption/low earnings years. The low interest rates of today occur as the Baby Boomers are in their relatively low consumption/high earnings years.

John Hagerson Naperville, Illinois

Investment Competency

To the Editor:

I agree with William Bernstein ("Riding for a Fall," Other Voices, November 26) that many people do not understand the market well enough to select individual stocks. But I am offended by his suggestion that as an individual investor I should prove my competency in managing my own account in order to maintain control of it. Judging by the returns on most mutual funds this year, I suggest he find a better way to ensure the competency of the "professionals" if he wants to help John Q. Public.

Katherine Wildey Sarasota, Florida

To the Editor:

Bravo to William Bernstein for explaining the risks associated with defined contribution retirement plans. While it makes enormous business sense for employers to transfer the risks of an underfunded pension scheme to employees, we should ask ourselves if employees are capable of making "informed" decisions.

Greg Kaldor London

Career Change?

To the Editor:

Is Alan Abelson a bond-fund manager? He certainly talks like one (Up & Down Wall Street, November 26). The recent rally in stock markets was not based on wildly bullish predictions on the economy; rather, the pre-September 11 sell-off had been based on wildly bearish predictions, principally from the bond markets.

Abelson is right in that this is not a normal cycle, but like most bond bulls he is blinded by an obsession with a stock-market bubble.

Also, the idea of comparing massive debt with a flow of income is absurd. What about the cost of debt? The Fed's data show that total debt service payments are around 14% of disposable income, i.e. cash flow cover of 7 times. Moreover, around 60% of that is fixed rate refinanceable mortgage debt. Any corporate bond market would give this a AAA rating.

Columnist Critique

To the Editor:

Gene Epstein starts his November 26 Economic Beat ("Taking an Economics Columnist to Task") stating that it may seem the "worst sort of professional rivalry to devote a whole economics column to the failings of another economics columnist."

This would be true if the two were in the same league. If a comparison is to be made, one only has to read Gene Epstein to see which column "happens to be an embarrassment."

It is about time that Epstein uses his many talents to tell us what his thoughts, ideas, research and analysis are, rather than spending so much time each week in criticism of others.

Donald Lee Rome West Hartford, Connecticut

To the Editor:

Congratulations to Gene Epstein. He clearly spells out the pluses and minuses of Paul Krugman's credentials as the only regular New York Times columnist who managed to cut a deal whereby he kept his day job, while moonlighting his books and columns on the side. Noticeably excluded in Krugman's references is the absence of credible hands-on experience in the front lines of business and finance.

Victor Eber Coral Gables, Florida

Envisioning Enron

To the Editor:

In the November 26 issue, Andrew Bary wrote in The Trader column about the dimming prospects of a merger being completed between Enron and Dynegy. He was absolutely correct. But to have the columnist remind the reader that Barron's made that call the week before is self-serving, especially considering Harlan Byrne's March 27, 2000, article "Enron: Hello, New Economy."

Although Byrne did not make predictions about the company's future stock price, many investors would be inclined after reading the article to believe that the stock had further to run.

Byrne stated that "starting next year, however, the picture should brighten sharply." If a stock price decline to less than $1 per share from $75 is a brighter picture, bankruptcy must be blinding.

Darin Feldman Aladdin Capital Stamford, Connecticut

To the Editor:

I have been reading some of the Enron documents filed with the SEC. There is no doubt that the California Public Employee Retirement System -- staunch defender of shareholder rights -- was a long-term co-investor in the infamous Enron JEDI partnerships.

It is clear that the JEDI partnerships were merely a device designed to hide Enron's liabilities from both its shareholders and the investing public. Shame on CALPERS. They financed the Enron scalpers. How can they ever explain that?

Daniel M. Novak Chicago

To the Editor:

Having worked in the past five or six years for both Enron and Dynegy in financial-accounting positions, I believe the stunning reversal of fortune at Enron should be stirring enough to serve as a national wake-up call.

Seventy-five percent of CEOs in a given industry cannot position themselves in the top quartile of their peer group. Corporate earnings cannot continue to grow at a 15% compounded annual rate when GDP growth potential is 3% and corporate profits in growth years are typically 8%-10% of GDP.

As long as the stock market imitates the pricing mechanism of the art market, there are safer places for pension assets than 401(k)s saturated with the employer's common shares. This story really isn't about an accounting "error." It's about something that's become a hallmark of an era.

George F. Vaughn Houston

Insurance Guarantees

To the Editor:

Congress currently is debating a multi-billion-dollar bailout of the insurance industry to ensure that there is coverage available for future terrorist-related losses ("Creating Reserves," Editorial Commentary, November 19). Without question, reasonably priced insurance for future terrorist-related liabilities is needed. But before Congress underwrites this massive relief program for future claims, it must require the insurance industry to honor its policies and pay the existing claims arising from the acts of September 11, 2001.

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